Recently, KGW Group Bhd $KGW / 0282 (KGW GROUP BERHAD) , an established logistics service provider, is making its debut on Bursa Ace Market .
• The company has been growing its business steadily over the past few years, despite the fluctuation of ocean freight rates.
• In FY23, KGW is expected to experience a drop in its average ocean freights revenue due to the normalization of World Container Freights Rates. However, the company's warehouse segment is anticipated to register high growth in the next 2 years.
• KGW's customer include Rierden Chemical & Trading Company, PMB Silicon Sdn Bhd, Camel Energy Inc, Interstate Batteries and CNC Cabinetry. The US market is the biggest market revenue contributor for KGW, accounting for 71.8% of revenue in FY22.
• In addition to logistic services, KGW intends to grow its warehousing and distribution of healthcare-related products and devices. This segment is currently contributing marginally to revenue, but management sees great potential and higher margin.
• KGW is moving from its rented 11,300 sq ft office and warehouse to a 53,455 sq ft office and warehouse situated in Glenmarie, Shah Alam (Target Property). The new warehouse space will allow KGW to provide warehouse services to their ocean/air freight customers that is strategically located near Port Klang, KLIA airports and Sultan Abdul Aziz Sha Airport.
• Of the RM16.7m IPO proceeds, RM10m will be utilized to pare down bank borrowing for the purpose of Target Property acquisition in December 2022.
• Being an asset light logistics player and higher yield from its warehouse rental, we believe net margin c.7% sustainable moving forward. We expect KGW to register a FY23 to FY25 revenue CAGR of 25.7% as premised on the new growing warehouse segment. KGW does not have any formal dividend policy presently.
Overall, KGW is a well-established logistics service provider with a strong track record of growth. The company is also well-positioned to capitalize on the growth of the healthcare-related products and devices market. The IPO is expected to be well-received by investors.